RNS Number:5662R
Genosis PLC
04 April 2008
For Immediate Release 4 April 2008
GENOSIS PLC
Preliminary Results Announcement
for the year ended 31 December 2007
Genosis PLC (AIM - GNOS), the AIM listed company, specialising in consumer
products for reproductive health, announces its preliminary results for the year
ended 31 December 2007.
Highlights
* Introduction of the Fertell couples test into the US market and on
www.fertell.com for the first time in June 2007. CVS and Longs Drugs, two of
the largest drug store chains in the US, are selling the product;
* Launch in February 2007 of the Fertell ovarian reserve test on the UK
high street through Alliance Boots and through www.fertell.co.uk;
* Secondary equity financing of �2.3million (gross) completed in June
2007.
* Initial stocking orders in the US were below expectations, and ongoing
order levels in the second half of the year have been disappointing, despite
the extensive media campaign. Recently, the Company announced a strategic
review of operations given the slower than anticipated take up of the
product in the US and has decided to place the Company and its assets up for
sale. In addition to its IP portfolio the Company has tax losses of �12
million and cash and other assets.
* The President of Genosis' operations in the US, Mr Bob Thompson left the
Group to pursue other interests.
Key financials:
12 months to 12 months to
31 Dec 2007 31 Dec 2006
�'000 �'000
Revenue 856 221
Gross loss (103) (80)
Operating loss (4,464) (3,954)
Cash at bank 1,759 3,632
Loss per share (pence) (17.0p) (23.5p)
For further details, please contact:
Today on:
Genosis plc Paul Bateman, Jonathan Pockson +44 (0)14 8377 4050
Buchanan Communications Lisa Baderoon +44 (0)20 7466 5000
Evolution Securities Tim Worlledge, Bobbie Hilliam +44 (0)20 7071 4300
Commercial and Operations
The Group's principal activity is the development and commercial exploitation of
technology in the field of human reproduction. This Commercial and Operations
Report and the Financial Report which follows are addressed solely to the
shareholders of Genosis PLC and have been prepared to meet the statutory purpose
of assisting shareholders to assess the Company's strategies and their potential
for success. Forward looking statements included in these reviews should not be
relied upon by shareholders or any other party and should not be used for any
other purpose and they are included here, in good faith, based simply upon the
knowledge and information available to the Directors up to the time of their
approval of this report. These statements should be treated with caution due to
the inherent uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
Genosis is an AIM listed consumer products company focused on reproductive
health. Fertell is the world's only US Food and Drug Administration ("FDA")
cleared "at home" fertility test for men and women. The product has been sold
throughout the UK and Ireland since 2006 through Alliance Boots ("Boots"). From
February 2007 the Company extended the range of Fertell products available from
Boots with the launch of its ovarian reserve test. Sales in the UK have been
broadly in line with expectations.
In June 2007 the Company successfully completed a secondary fundraising of
�2.3million. The proceeds were used to help fund Genosis' US consumer marketing
campaign and also to cover other overhead and marketing expenses.
Also in June 2007, Genosis launched the Fertell product in the US through the
chain drugstores CVS and Longs Drugs. However, despite being well accepted by
the media on launch, unit sales of Fertell through retail have been
significantly below expectations. This has had a detrimental impact upon gross
margins and operating losses.
In September 2007, the Company announced that due to the very disappointing US
retail sales, it was reviewing its strategic options and had also significantly
reduced its ongoing operational costs.
The Fertell product
The Fertell couples kit, comprising one male and one female fertility testing
device, is the only over the counter ("OTC") product available with FDA
clearance on the high street that allows couples to test accurately their
fertility quickly and simply in the privacy of their own home.
Fertell addresses the fact that fertility is a "couple" issue, since successful
conception is dependent on both partners. However, since it is usually the woman
who leads the family planning efforts, Fertell is positioned as a home-use OTC
product, targeting the female-driven nature of the purchase. The positioning is
focused on:
Early confirmation - to save valuable time during the process of trying to
conceive, in order to take the most appropriate course of action;
Convenience, economy and privacy - enabled by the home-use of the test;
Ability to ease the psychological stress and reduce anxiety, prior to the
one year timeline - recommended under National Institute for Health and Clinical
Excellence guidelines; and
Control - allowing couples to determine for themselves important decisions
about fertility planning.
CURRENT TRADING AND OUTLOOK
Fertell went on sale in the US in June 2007 and is being sold by CVS, the
largest drug store chain in the US with over 6,000 stores across 43 states and
through Longs Drugs with over 500 stores on the west coast.
The product launch generated good media coverage across print, television, radio
and online. Notably, Fertell was featured on "Good Morning America" (ABC News),
"The Early Show" (CBS) and "The Big Story" (Fox News). The PR programme was
complemented by an advertising campaign across print and web media.
Despite Genosis' significant US marketing launch campaign, US sales for the
period to 31 December 2007 were well below forecast and extremely disappointing.
Cash at the end of December 2007 was �1.8million.
BUSINESS RISKS AND GOING CONCERN
The Directors have identified specific risks of the business. Genosis has only
one product, Fertell, and its future is totally dependent upon that product. In
addition, the Group is dependent upon key distributors to retail Fertell in the
UK and US markets. Competition may also arise in the future and also customers
may not be able to distinguish readily between different product categories in
the area of human fertility. Genosis' business depends on products and services
provided by third parties, if there are problems with those suppliers and the
resultant quality and sourcing of product then Genosis may not be able to find
replacement manufacturers on a timely basis or at all.
The Directors believe that the key market for the success of Fertell is the
USA. Despite the extensive media campaign, US sales since June 2007 have not
reached the targets set and have been disappointing. The Group have an ongoing
commitment to this marketing campaign in the short-term. The ability of the
Group to continue as a going concern is dependent on the generation of future
sales and reduction of costs.
In the light of this information, while the Group will continue with the US
marketing campaign in the short-term, the Directors are now reviewing their
strategic options with regards to the company and, in the meantime, are carrying
out a review of operations so as to reduce costs in the absence of an immediate
and significant increase in sales. The Directors have considered detailed profit
and loss account and cash flow forecasts for different strategic options and
have a reasonable expectation that the Group has adequate resources to continue
as an operational business for the foreseeable future.
These financial statements have been prepared on the going concern basis,
however, material uncertainty remains over the Group's ability to generate
future sales and to reduce costs, which may cast significant doubt on the
ability of the Group to continue as a going concern. Therefore, the Group may be
unable to realise its assets and discharge its liabilities in the normal course
of business. These financial statements do not contain any adjustments that
would result if the company was not able to continue as a going concern as it is
not practicable to determine or quantify them. However, such adjustments might
include the impairment of certain intangible, tangible and current assets.
Financials
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial statements in accordance with United Kingdom General
Accepted Accounting Practice (UK GAAP). The Group's financial statements for the
year ending 31 December 2007 are the first annual financial statements that
comply with International Financial Reporting Standards (IFRS). This financial
information is therefore prepared in accordance with IFRS. All comparative
information has been restated to comply with the new accounting policies
adopted.
The most significant change involved in the adoption of IFRS is the creation of
a foreign exchange reserve as required under IAS 21 (The Effects of Changes in
Foreign Exchange Rates).
The change to equity arising from the introduction of IFRS is a credit of �211k
as at 1 January 2006 following a fair value adjustment required under IAS 32
(Financial Instruments: Disclosure and Presentation) and IAS 39 (Financial
Instruments: Recognition and Measurement) and a credit of �7k as at 31 December
2006.
RESULTS
Group revenue was �0.9 million (2006: �0.2 million) resulting entirely from the
sale of the Fertell product.
The Group's gross loss for the year was �103k (2006: loss �80k). During 2007 the
cost of sales was adversely impacted by the high costs of low volume
manufacturing runs, the write off of obsolete components and reflects the
relatively low volumes of production.
Operating expenses include charges in relation to the Group's share option plans
of �50k (2006: �100k)
The Group's operating loss for the year was �4,464k (2006: �3,954k).
Net interest income was �18k (2006:�38k) mainly comprising the balance of
interest received on cash deposits and the costs of servicing the venture loan
taken out on 31 March 2005.
The Group received payment of a tax credit during the year (relating to the 2006
trading year) of �192k (2006: �60k) in respect of the UK government's R&D tax
credit scheme and intends to apply for the payment of a credit in respect of
2007, however the Directors have been prudent in not recognising this in the
current year prior to submission to and agreement by HM Revenue and Customs.
Basic loss per share was 17.0p (2006: loss of 23.5p) based on a weighted average
number of shares in issue of 25.1 million (2006: 15.5 million).
The Group employed 7 people at 1 January 2008 (including 2 Non-Executive
Directors) (1 January 2007: 17, of whom 2 were Non-Executive Directors).
CASH FLOW
The Group's net decrease in cash and cash equivalents for the year was �1.9
million (2006: net cash decrease of �4.2 million) of which the main elements
were:
*Cash outflow from operating activities �3.5 million (2006: �3.9 million);
*Repayment of loans �0.5 million (2006: �0.4 million);
*Cash from share issues �2.3 million (2006: �1k);
*Working capital fell to �1.3 million (2006: �3.4 million); and
*Cash at the year end was �1.8 million (2006: �3.6 million).
FUNDING
The Group raised external funding during 2007 of �2.3 million through the issue
of further ordinary shares.
The venture loan, originally drawn down in March 2005 is being repaid in 36
monthly instalments as set out in the loan agreement. The principal amount of
the loan outstanding at 31 December 2007 was �0.1 million (2006: �0.6 million).
The loan was fully repaid on 1st February 2008.
Consolidated profit and loss account for the year ended 31 December 2007
2007 2006
�'000 �'000
Revenue 856 221
Cost of sales (959) (301)
Gross loss (103) (80)
Distribution costs (2,114) (1,690)
Administrative expenses (1,312) (986)
Other expenses (935) (1,198)
Operating loss (4,464) (3,954)
Interest receivable 120 246
Interest payable (102) (208)
Fair value charges - 211
Loss before tax (4,446) (3,705)
Income tax credit 192 60
Loss after tax (4,254) (3,645)
Loss per share
Basic (17.0p) (23.5p)
Diluted (17.0p) (23.5p)
All amounts derive from continuing operations.
Consolidated statement of changes in equity at 31 December 2007
Attributable to equity holders of
the group Foreign
Share Share Other Retained exchange
capital premium reserves deficit reserve Total
�'000 �'000 �'000 �'000 �'000 �'000
At 1 January 2006 1,549 8,430 8,270 (11,126) - 7,123
Loss for the period - - - (3,645) - (3,645)
Foreign currency - - - - (61) (61)
translation difference
Total recognised loss for - - - (3,645) (61) (3,706)
the period
Credit in respect of share - - - 101 - 101
option plans
Issued share capital 1 - - - - 1
At 31 December 2006 1,550 8,430 8,270 (14,670) (61) 3,519
Loss for the period - - - (4,254) - (4,254)
Foreign currency - - - - (20) (20)
translation difference
Total recognised loss for - - - (4,254) (20) (4,274)
the period
Credit in respect of share - - - 52 - 52
option plans
Issue of share capital 1,784 535 - - - 2,319
At 31 December 2007 3,334 8,965 8,270 (18,872) (81) 1,616
Group balance sheet as at 31 December 2007
2007 2006
�'000 �'000
Assets
Non-current assets
Intangible assets 132 123
Property, plant and equipment 114 153
Total non-current assets 246 276
Current assets
Inventories 376 373
Trade and other receivables 76 470
Cash and cash equivalents 1,759 3,632
Total current assets 2,211 4,475
Total assets 2,457 4,751
Equity and liabilities
Equity attributable to equity holders
Share capital 3,334 1,550
Share premium 8,965 8,430
Other reserve 8,270 8,270
Retained deficit (18,872) (14,670)
Foreign exchange reserve (81) (61)
Total equity 1,616 3,519
Non-current liabilities
Long-term borrowings - 146
Total non-current liabilities - 146
Current liabilities
Trade and other payables 588 539
Current portion of long-term borrowings 146 505
Short-term provisions 107 42
Total current liabilities 841 1,086
Total liabilities 841 1,232
Total equity and liabilities 2,457 4,751
These financial statements were approved by the Board of Directors on 14th March
2008.
Consolidated cash flow for the year ended 31
December 2007
2007 2006
�'000 �'000
Cash flows from operating activities
Operating loss (4,464) (3,954)
Adjustments to reconcile operating loss to
net cash flows from operating activities
Depreciation 65 59
Amortisation 244 93
Share option plans 52 101
Foreign exchange (17) (105)
(4,120) (3,806)
Working capital adjustments
Decrease in trade and other receivables 394 327
Increase in inventories (3) (100)
Increase/(decrease) in payables 52 (257)
Increase in provisions 65 38
Cash generated from operations (3,612) (3,798)
Interest paid (102) (208)
Taxation received 192 60
Net cash used in operating activities (3,522) (3,946)
Cash flows from investing activities
Purchase of property, plant and equipment (26) (56)
Purchase intangibles (253) -
Interest received 120 246
Net cash from investing activities (159) 190
Cash flows from financing activities
Proceeds from issue of share capital 2,319 1
Repayment of long-term borrowings (505) (397)
Net cash from/(used in) financing activities 1,814 (396)
Net decrease in cash (1,867) (4,152)
Exchange movement in cash (6) 27
Net decrease in cash and cash equivalents (1,873) (4,125)
Cash and cash equivalents at the beginning 3,632 7,757
of the period
Cash and cash equivalents at the end of the 1,759 3,632
period
Notes to the preliminary results announcement for the year ended 31 December
2007.
1. Nature of financial information
These financial results do not constitute the Group's full statutory financial
statements for the year ended 31 December 2007 or 2006 however they have been
extracted from those statutory financial statements. Statutory accounts for 2006
have been delivered to the Registrar of Companies and those for 2007 will be
delivered following the Company's Annual General Meeting.
The auditors have reported on these accounts and the audit reports for Genosis
PLC for both the years ended 31 December 2007 and 2006 were unqualified but
modified to include an emphasis of matter paragraph due to the uncertainty (as
discussed below) which may cast significant doubt on the Group's ability to
continue as a going concern. The audit reports for both years did not contain
statements under section 237(2) of the Companies Act 1985 (regarding adequacy of
accounting records and returns) or under section 237(3) (regarding provision of
necessary information and explanations).
The consolidated results of Genosis PLC for the year to 31 December 2007 have
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRS) and International Financial
Reporting Interpretations Committee interpretations that have been adopted for
use in the European Union, and with those parts of the Companies Act 1985
applicable to companies reporting under IFRS. The comparative financial
information for the year ended 31 December 2006 has been extracted from the
published accounts and restated to reflect IFRS adjustments.
Going concern
The Directors believe that the key market for the success of Fertell is the
USA. Despite the extensive media campaign, US sales since June 2007 have not
reached the targets set and have been disappointing. The Group have an ongoing
commitment to this marketing campaign in the short-term. The ability of the
Group to continue as a going concern is dependent on the generation of future
sales and reduction of costs.
In the light of this information, while the Group will continue with the US
marketing campaign in the short-term, the Directors are now reviewing their
strategic options with regards to the company and, in the meantime, are carrying
out a review of operations so as to reduce costs in the absence of an immediate
and significant increase in sales. The Directors have considered detailed profit
and loss account and cash flow forecasts for different strategic options and
have a reasonable expectation that the Group has adequate resources to continue
as an operational business for the foreseeable future.
These financial statements have been prepared on the going concern basis,
however, material uncertainty remains over the Group's ability to generate
future sales and to reduce costs, which may cast significant doubt on the
ability of the Group to continue as a going concern. Therefore, the Group may be
unable to realise its assets and discharge its liabilities in the normal course
of business. These financial statements do not contain any adjustments that
would result if the company was not able to continue as a going concern as it is
not practicable to determine or quantify them. However, such adjustments might
include the impairment of certain intangible, tangible and current assets.
2. Loss per share
Fully diluted loss per share is calculated after showing the effect of
outstanding options in issue.
The calculation of loss per share is based on the following loss and numbers of
shares:
2007 2006
�'000 �'000
Loss on ordinary activities after taxation (4,254) (3,645)
Weighted average number of shares ('000):
For basic earnings per share 25,079 15,496
Dilutive effect of share options - -
For fully diluted earnings per share 25,079 15,496
Basic and diluted loss per share (pence) (17.0) (23.5)
3. Share capital
Share capital AUTHORISED ISSUED
Ordinary shares of �0.10 Ordinary shares of �0.10
Number Nominal Number Nominal
At 31 December 2006 20,000,000 �2,000,000 15,496,556 �1,549,656
Shares issued during the 17,834,611 �1,783,461 17,842,515 �1,784,251
period
At 31 December 2007 37,834,611 �3,783,461 33,339,071 �3,333,907
7,904 Ordinary shares were issued on 11 April 2007 following the exercise of
certain share options at an exercise price of �0.10 per share. 17,834,611 new
Ordinary shares of �0.10 per share were authorised and issued at �0.13 per share
on 19 June 2007.
Share premium
The share premium account has been established to represent the excess of the
issued share price over the nominal value of the shares.
Foreign exchange reserve
The foreign exchange reserve comprises all foreign exchange differences arising
from the translation of the financial statements of foreign operations.
Other reserves
The other reserve represents the share premium account of Genosis Inc, and the
reserve created at the time of the group reconstruction that took place in 2005.
This represents the difference between the nominal value of the shares issued as
consideration and the nominal value of the shares acquired in the
reconstruction.
4. Segmental reporting
The Group has one line of business operating in both UK and US.
2007 2006
�'000 �'000
Revenue
UK 259 221
US 597 -
856 221
Operating loss
UK (2,427) (3,241)
US (2,037) (713)
(4,464) (3,954)
All of the Group's operating assets and liabilities are located in the UK with
the exception of net operating liabilities of �90k ($181k) (2006: net
liabilities of �92k ($181k)) located in the USA.
All the Group's capital expenditure occurred in the UK. Depreciation and
amortisation charges of �307k were incurred in the UK and �2k was incurred in
the US.
NOTES TO EDITORS (THIS DOES NOT FORM PART OF THE PRELIMINARY RESULTS
ANNOUNCEMENT)
Genosis is a consumer products company focused on reproductive health. Genosis'
first product Fertell(R), an at-home fertility testing kit for men and women,
went on sale in the UK in January 2006. Fertell(R) was designed and developed by
Genosis and is the first and currently the only OTC product on the high street
that allows couples to accurately test both male and female fertility quickly
and simply in the privacy of their own home. Genosis' product Fertell(R) makes
the breakthrough of taking accepted technology from the laboratory into easy to
use fertility testing devices for testing at home.
Fertell(R) is easy to use. The woman's test is used in a similar way to a
pregnancy test but, unlike any other test that is available for use at home, it
assesses the quality of the egg she releases. For the male test, the man has to
produce a sample, push a button and twist a switch and, in just over an hour,
the test will show him if he has enough motile sperm that can swim to reach an
egg (based on WHO standards). Fertell(R) has been through clinical trials in the
UK and the US and has been shown to be more than 95% accurate when compared with
established laboratory tests run in fertility clinics. Fertell(R) has been
cleared for sale in the US by the FDA and has received CE marking for sale in
Europe.
The Company's first retail distribution agreement is with Alliance Boots, the
UK's biggest healthcare retailer with more than 1200 stores nationwide. The
Boots Distribution Agreement is exclusive for the UK until November 2008. Boots
sells Fertell(R) through its high street branches in the UK and the Republic of
Ireland and through the internet. The Fertell(R) kit is also available through
Genosis' own website, www.fertell.co.uk. In the US the product is sold through
CVS and Longs Drugs and also through the internet www.fertell.com.
The market for Fertell(R) could potentially be quite large. There are in excess
of 500 million couples of reproductive age worldwide, and approximately 1 in 7
or about 80 million have problems conceiving. There is a significant increase in
the industrialised world in the number of women deferring childbearing until
after 30. This has a marked effect on fertility. Although male factor
infertility is the single most common cause of infertility, the key prognostic
indicator of a couple's fertility is the age of the female partner, with
fertility rates, upon treatments such as IVF, halving between the ages of 30 and
38. In the UK, couples most frequently turn to their medical providers for
assistance, but typically are advised to wait and try to conceive for a further
period of up to 12 months before returning for tests and treatment. The key
benefit of Fertell(R) is that it allows men and women to assess their fertility
status in the privacy of their own home and, the earlier couples can identify
whether a problem exists, the earlier they can seek treatment and the more
likely they are to conceive.
www.genosis.com www.fertell.com www.fertell.co.uk
- E N D S -
This information is provided by RNS
The company news service from the London Stock Exchange
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